Aussie Post says it’s time to adapt or die

There was a turning point this week in the debate about Australia Post’s future, which may change the way postal services are regulated for the first time in decades.

Communications Minister
Malcolm Turnbull
gave the strongest signal so far that the government is open to reviewing the community service obligations (CSO), which include caps on stamp prices and a five-day-a-week mail delivery service.

These obligations have been in place since the 1980s, before email, iPads and smartphones replaced traditional snail mail for a bulk of the Australian population.

Turnbull warned Australia Post faced a “sea of red ink" without changes to the regulations. These may include introducing a two-speed letters service and reducing commitments for regulator postal services from five days a week to three. This was music to
Ahmed Fahour
’s ears. The Australia Post boss has been out selling the message for some time that his organisation must adapt or die. It has been a frustrating process and not everyone buys his reform agenda.

While a majority of the population communicate online, there is huge resistance to the idea of killing off a daily mail service.The elderly and remote communities are particularly vulnerable.

Fahour has also been under fire over plans announced this month to cut 900 jobs in an effort to stem losses. He gave his annual bonus to charity months before his $4.8 million salary came under fire over the job cuts. (CEO salaries are popular targets for unions when things are going badly as
Qantas
boss
Alan Joyce
will testify.)

Fahour was feeling more optimistic this week though and “delighted" with Turnbull’s speech to the CEDA annual conference in Canberra. He is careful not to say when he expects changes, if any, to go before cabinet, except to say they need to happen soon. “I don’t want the change and reform to be in a year’s time. We need it now," Fahour told Chanticleer.

“What is not as well understood is the complexity of the task of managing very gently, carefully and gradually the change today that is required so that by the next three to five years we have transited the organisation to where society is going."

Related Quotes

Company Profile

The Australia Post boss is in the odd position of having to talk up the structural challenges affecting his business to ensure it has a future in the digital age. Australia Post, a former government-owned monopoly, is run like a private company in the sense that it must make a commercial rate of return. At the same time it has to adhere to CSOs which force it to provide mail deliveries, even when they are losing money.

With the option of government subsidies or privatisation off the table, moving to a multi-speed letters service for consumers is the most viable option to stop the bleeding. Fahour wants to make it clear he is not just asking for a three-day mail service but a system that lets customers choose to pay more or less depending on what speed of service they want. Since the two-speed service was introduced for business customers on June 2, he says 70 per cent of volumes have moved to the slower speed. “They are happy for slower speed at a cheaper price," he says. Business and government accounts for 95 per cent of all of Australia Post’s mail but the message is that regular customers will not mind paying less to get their mail a few times a week.

Fahour, who is splitting the organisation’s profitable parcels operations from its letters and services operations, says privatisation has never been on his agenda despite speculation parcels could be hived off and sold. Australia Post’s future also rests with innovation and offering more government services to ensure the post office remains relevant. He says there are plans to open 50 superstores in regional and rural areas by 2020.While Australia Post has been a payments company for more than a decade, he admits it fell behind about five years ago when a lot of payments went online. Fahour, a former National Australia Bank senior executive, says he believes in opportunities in financial services but says there are no plans to “become a bank".

With Turnbull and Fahour now singing from the same hymn book, change looks inevitable. Australia Post is expected to post a $300 million loss this year. The boom in parcel deliveries is not enough to stem losses from letters, which are expected to hit $12 billion in a decade.

Fahour has a mountain of statistics in his armoury to highlight why snail mail is no longer relevant in the digital age. At its peak in 2008, Australia Post delivered 5 billion letters a year or 18 million a day. This compares to the free smartphone application called WhatsApp, which sends 4 billion messages in Australia per day. Then there are the 400 billion emails sent within Australia each year. Australia Post is up against the world’s greatest technology giants and more changes are coming. Changing the CSOs on their own will not be enough to ensure its survival.

There was not a lot in
Greg Medcraft
’s defence on Friday of a damning Senate report into the
Commonwealth Bank
financial planning scandal that inspires much confidence the system can be fixed.

Medcraft correctly points out that the Australian Securities and Investments Commission (ASIC) is poorly resourced to police the financial planning industry and says it up to consumers to be alert for dodgy planners. In other words, the regulator is recommending self-regulation. There is little comfort in the fact that the regulator has 30 staff monitoring 40,000 financial planners. ASIC wants greater powers to impose the stiffer penalties that it currently lacks.

Some of the Senate report’s recommendations are things Medcraft has already been pursuing, such as a register of financial advisers and a national competency exam. He is careful with the way he words it, but the last thing Medcraft wants is another government inquiry that will heap more criticism onto ASIC while further draining his limited resources.